Tax Liens and Levies

Unpaid taxes or unfiled tax returns cannot simply be willed into nonexistence. The Internal Revenue Service has various methods of recovering amounts owed, and they will use them when appropriate. Federal tax liens and levies are powerful collection tools that ensure full payment from those with outstanding tax debts, and even the savviest individuals are loathe to avoid repayment when liens and levies are in effect.

Tax liens work to protect and secure the government's rights to property of individuals and businesses stemming from unpaid tax obligations. Tax levies are the actual means of seizing such property in order to pay them. While the prospect of either enforcement action is unpleasant and often frightening to taxpayers, it is important to note that every individual and business enjoys rights that can help defend against lien filings and prevent levies from being issued.

Relief from Tax Liens & Levies

At Rosenberg Martin Greenberg, we stand ready to put our years of experience to work for you and help resolve your tax concerns once and for all. As Baltimore-based tax attorneys, we pledge to work in a collaborative manner with you as well as with the applicable taxing authority to achieve full compliance and mitigate potential penalties associated with state or IRS tax collections. However, because the available time to reach an agreement with the IRS or state tax officials is not unlimited, it is best to enlist our assistance as soon as you become aware that you are the target of collection activity.

The Process and Effect of Tax Liens

When a taxpayer receives a notice and demand for payment, but does not remit the balance due, a federal tax lien will arise by operation of law. This lien will relate back to the original tax assessment date. Tax liens attach to all property and any right to property belonging to the taxpayer. Liens stay with the property until the lien has expired, has been released or if the property in question has been otherwise discharged from it. A lien will not be impacted by a transfer of the property, and if the property is sold by the delinquent taxpayer, the lien will attach to the sale proceeds.

It should also be noted that a lien will not be released merely by a taxpayer's initiation of an installment agreement or the account's placement in a "Currently Not Collectible" status. A taxpayer wishing to sell or otherwise transfer property already subject to a federal tax lien must first satisfy the liability in full or seek a discharge of the property from the lien.

As a means to protect its interests against third parties, the IRS will file a Notice of Federal Tax Lien in the taxpayer's home jurisdiction or where the property itself is located. This serves to put all others on notice of the government's claim on the property. The Comptroller of Maryland will act in a similar manner for outstanding state obligations by filing a Notice of Lien of Judgment for Unpaid Tax.

It should be noted that the existence of a Notice of Federal Tax Lien or Notice of Lien of Judgment for Unpaid Tax will have a substantial adverse impact on a taxpayer's credit score and ability to secure new funds, generate business, obtain security clearances or maintain employment. Fortunately, under certain circumstances, taxpayers may be able to succeed in avoiding such public filings or in convincing the IRS or the Comptroller of Maryland to withdraw or vacate their notices.

When Liens Become Levies

Anyone who is under threat of a tax lien needs to realize that federal liens are not self-executing. This means that they do not, in and of themselves, work to seize property in order to satisfy tax debts. Liens are simply notices or claims intended to provide security for the amount owed. In order for the government to actually collect what is due, an affirmative action of one type or another must be made to enforce the obligation. A levy is the legal seizure of property to meet a delinquent tax liability, and it permits the IRS or state government to take and sell almost any type of real or personal property owned by an indebted taxpayer. Such a seizure could include a personal home, a boat, a car, wages, a retirement account, rental income, commission payments or accounts receivable.

Exemptions to levy include things such as:

Workers compensation payments,

Unemployment benefits,

Household goods

Some tools of your specific trade.

While threat of a tax levy is certainly a terrifying thing for just about anyone, and the power of the IRS in this respect is nearly unrivaled, there are certain procedural steps that are followed before actual property seizures can occur.

The IRS must conduct a thorough investigation into the circumstances of the tax debt, including:

Formal verification of the tax liability

Analysis of whether the levy itself is economical

Consideration of available collection alternatives

Determination of whether any equity in non-cash property will yield sufficient funds from sale to impact the liability

Procedural Safeguards Available to Taxpayers

Prior to actually seizing taxpayer property, the IRS is required to send a notice of intent to levy. At this point, it may be possible for taxpayers to secure installment payment arrangements, "currently non collectible" status or other relief. If penalties have already been assessed, a skilled IRS tax collections attorney can work to negotiate their abatement. It is also possible to contest levies on an administrative basis in U.S. Tax Court, and property owners have the ability to contest procedural deficiencies of levies in U.S. District Court. In either circumstance, however, the assistance of the Rosenberg Martin Greenberg team can prove invaluable in obtaining a favorable resolution.

We regularly assist clients with applications for release, subordination, withdrawal, discharge and non-attachment of tax liens at both the state and federal level. Our lawyers are skilled practitioners when it comes to filing Collection Due Process and Equivalency hearing requests, pursuing administrative collection appeals and litigating adverse Notices of Determination in tax collection matters.

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